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Most people have a general idea of what assets and liabilities are, but when it comes to calculating them, things can get a bit murky.
Do you include the value of your home? What about your car or furniture? How do you factor in debts?
And what is the difference between liquid and fixed assets?
Calculating your assets and liabilities may seem daunting at first, but it’s a vital step in understanding your financial situation. In this post, we’ll break down the process step-by-step and show you how to get an accurate picture of your current financial status. So don’t worry if it all seems a little confusing at first – by the end of this post, you’ll be able to calculate your assets like a pro!
Calculating Fixed Assets
Fixed assets are items that you own and will keep for a long period of time, such as real estate or vehicles. To calculate your fixed assets, add up the value of each item. There are two ways to do this:
The first is to use market values, which is how much an item would cost if you were to buy it new today. If you already know the current market value of an item, simply add it in to your total.
The second way is to use appraisal values, which is what an expert assessor would deem the worth of an item based on its condition and age. This method can be more accurate than using market values, but it requires more work – you’ll need to hire an appraiser to assess the item in question.
Calculating Liquid Assets
Liquid assets refer to items that can be quickly converted into cash, such as stocks or bonds. To calculate your liquid assets, add up the market value of each item. This is usually simple enough since most liquid assets are traded on exchanges and have readily available values.
Factoring In Liabilities
Liabilities are debts or obligations that you owe to another party. To factor them in to your overall financial picture, subtract any outstanding liabilities from your total asset value. For example, if you have $10,000 in fixed assets and $5,000 in debt, then your net worth would be $5,000 ($10,000 – $5,000 = $5,000).
Conclusion
Calculating your assets and liabilities is an important part of understanding your financial situation. By following the steps outlined above, you can get a clear picture of how much money you have, how much debt you owe, and what your net worth is. Armed with this information, you can make informed decisions about managing your finances and growing your wealth.